THE COMPANIES BILL, 2013 MEMORANDUM

Transcription

1 THE COMPANIES BILL, 2013 MEMORANDUM The objects of this Act are to (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) promote the development of the economy by encouraging entrepreneurship and enterprise efficiency and creating flexibility and simplicity in the formation and maintenance of companies; encourage transparency and high standards of corporate governance by providing for the functions and obligations of company secretaries and directors; provide for the incorporation, categorization, management and administration of different types of companies; provide for mergers, amalgamations, and takeovers; provide for the registration of foreign companies doing business in Zambia; provide for co-operatives to operate under the style of companies and be registered; provide for the colour coding of certificates of incorporation of Zambian companies and of the registration certificates of foreign companies; incorporate financial reporting provisions; provide for the responsibilities of public companies; provide for the start up and functioning of small companies; repeal and replace the Companies Act, 1994; and 1

2 (l) provide for matters connected with or incidental to the foregoing. Mumba Malila ATTORNEY - GENERAL 2

3 ARRANGEMENT OF SECTIONS TABLE OF CONTENTS Section PART I PRELIMINARY 1. Short title 2. Application 3. Interpretation PART II REGISTRATION AND INCORPORATION 4. Incorporation of company 5. Essential requirements 6. Articles of association and amendments 7. Signing and adoption of articles of association 8. Effect of articles of association 9. Adoption of new articles of association 10. Registration and certificate of incorporation 11. Certificate to be evidence of incorporation 12. Legal status of registered company 13. Register and other records PART III TYPES OF COMPANIES AND REQUIREMENTS 3

4 14. Type of Companies 15. Categories of companies 16. Public companies 17. Private companies limited by shares 18. Companies limited by guarantee 19. Unlimited companies 20. Statutory regulated company. 21. Conversion of company limited by shares to company limited by guarantee. 22. Requirements for converting company 23. Conversion of limited company into unlimited company 24. Conversion of unlimited company into limited company 25. Associated bodies corporate 26. Colour coding PART IV COMPANY NAME 27. Abbreviation of limited company 28. Dispensation of Limited in company name 29. Revocation of dispensation of Limited by Registrar. 30. Reservation of company name 31. Application for name and reservation of name 32. Change of company name 33. Date of effect of change of name 4

5 34. Company to ensure name is correctly stated 35. Company incorrectly stated 36. Effect of change of name on public notices PART V CAPACITY, POWERS AND VALIDITY OF ACTS 37. Capacity, powers and rights 38. Dealings between company and other persons 39. No presumption of knowledge of articles of association PART VI DE-REGISTRATION OF COMPANY 40. Power of registrar to de-register company. 41. Property of deregistered company 42. Registrar to represent defunct company 43. Continuation of liability of directors, shareholders and others 44. Power of court to declare dissolution of company void PART VII ADMINISTRATION AND MANAGEMENT OF A COMPANY 45. Registered office 46. Changing registered office 47. Records kept at company s registered office 48. Inspection of records 5

6 49. Seal of company 50. Official seal for use abroad 51. Form of contracts and instruments registered 52. Bills of exchange 53. Execution of deeds abroad 54. Service of documents on company 55. Service of documents by company 56. Liability of company occasioned by agent PART VII SECRETARY AND DIRECTORS 57. Company Secretary 58. Duties of company secretary 59. Body corporate or partnership may be appointed company secretary 60. Management of company 61. Limitations on powers of directors 62. Shareholder to be member of the Board 63. Delegating powers of company 64. Board Committe 65. Shareholder to be member of Board 66. Residential requirements of directors 67. Qualifications of director 6

7 68. Consent in writing before appointment as director 69. Starting to hold office as director 70. Court may appoint Directors 71. No directions or instructions to be given to directors by person not eligible to be director 72. Alternate directors 73. Request to increase number of directors 74. Removal from office of director 75. Vacancy in office of director 76. Notice of change of Directors 77. Resignation by director 78. Replacing company s majority shareholder who dies 79. Non accumulation of duties 80. Disclosure of replacement of directors 81. Duty of directors to act in good faith and in best interest of company 82. Exercise of powers in relation to employees 83. Directors to comply with Act and articles 84. Reckless trading 85. General duties of director 86. Risk Management 87. Fiduciary duty of directors 88. Duty to promote success of company 89. Duty to exercise independent judgment 90. Duty to exercise reasonable care, skill and diligence 91. Duty to avoid conflict of interest 92. Meaning of interest 7

8 93. Duty not to accept third party benefits 94. Directors duty of care 95. Use of information and advice 96. Transaction requiring approval by company 97. Transaction in which a director has a personal interest 98. Disclosure of interest of director 99. Transaction in which member of the board of directors has interest to be void 100. Effect of voiding transaction 101. Non voting by directors interested in transaction 102. Disclosure of information 103. Disclosure of interest in shares issued by company 104. Obligation of member of the board of directors to disclose acquisition or disposal of shares 105. Restrictions applicable to members of the board of directors regarding disposal of shares 106. Liability for amount equivalent to fair value of shares or debentures 107. Exception for companies dealing with securities 108. Proceedings of board of directors 109. Remuneration and other benefits for member of board of directors and executives 110. Decisions that board of directors may approve instead of meeting of shareholders 111. Transactions by a company with regard to issuing a guarantee or loan 112. Rights of share holders 8

9 113. Ethics and duties of a company s officers 114. Liability of director or officer who commits breach of duty 115. Criteria for decision to be considered valid 116. Liability and indemnity with regard to decisions that are made 117. Compensation by company 118. Criteria for compensation 119. Subscribing for insurance for director or employee of company or subsidiary company PART IX SHARES AND DEBENTURES 120. Legal nature of shares 121. Rights and powers attaching to shares 122. Types of shares 123. No nominal value 124. Transferability of shares 125. Issue of shares on incorporation and amalgamation 126. Issue of other shares 127. Notice of share issue 9

10 128. Shareholder approval for issue of shares 129. Pre-emptive rights 130. Consideration for issue of shares 131. Consideration to be decided by board 132. Exceptions to section Consideration in relation to issue of options convertible securities 134. Consent to issue shares 135. Time of issue of shares 136. Board may authorise distributions 137. Dividends 138. Shares in lieu of dividends 139. Recovery of distributions 140. Reduction of shareholder liability and distribution 141. Company may acquire its own shares 142. Acquisition of company s own shares 143. Board may make offer to acquire shares 144. Special offers to acquire shares 145. Disclosure document 146. Stock exchange acquisition subject to prior notice to shareholders 147. Disclosure document for stock exchange acquisitions 148. Stock exchange acquisitions not subject to prior notice to shareholders 149. Cancellation of shares repurchased 150. Enforceability of contract to repurchase shares 151. Company may hold its own shares 10

11 152. Rights and obligations of shares company holds in itself suspended 153. Reissue of shares company holds in itself 154. Redeemable shares 155. Redemption at option of company 156. Company shall satisfy solvency test 157. Special redemption of shares 158. Disclosure document 159. Cancellation of shares redeemed 160. Redemption at option of shareholder 161. Redemption on fixed date 162. Financial assistance 163. Company shall satisfy solvency test for financial assistance 164. Special financial assistance 165. Disclosure document for special financial assistance 166. Financial assistance not exceeding five percent of shareholders funds 167. Enforceability of transactions 168. Subsidiary may not hold shares in holding company 169. Statement of shareholders rights 170. Transfer of shares 171. Transfer of shares by operation of law 172. Company to maintain share register 173. Place of share register 174. Evidence of legal title to shares 175. Director s duty to supervise share register 176. Power of court to rectify register 11

12 177. Trusts not to be entered on register 178. Personal representative shall be registered 179. Assignee of bankrupt shall be registered 180. Share certificates 181. Perpetual debentures 182. Power to reissue redeemed debentures 183. Specific performance of contracts to subscribe for debentures PART X PUBLIC ISSUE OF SHARES 184. Interpretation 185. Offer of sale deemed to be made by the company 186. First publication of prospectus 187. Invitations to the public and prospectuses 188. Prospectus required for invitations to the public to purchase share or debentures 189. Contents of prospectus 190. Experts consent 191. Registration of prospectus 192. Over subscription in debenture issue 193. Reference to stock exchange listing prospectus-allotment 194. Civil liability for misstatements or omissions in prospectus 195. Offence of misstatement or omission in prospectus 196. Stop trading order 12

13 197. Waiting period 198. Withdraw of application after waiting period 199. Allotment and minimum 200. Statement in lieu of prospectus 201. Prohibition of waiver and notice PART XI SHAREHOLDERS AND THEIR RIGHTS AND OBLIGATIONS 202. Shareholder 203. Liability of shareholders 204. Liability of former shareholders 205. Additional provisions relating to liability of shareholders and former shareholders 206. Liability for calls 207. Shareholders not required to acquire shares by alteration to articles 208. Liability of personal representative 209. Liability of assignee 210. Exercise of powers reserved to shareholder 211. Exercise of powers by ordinary resolution 212. Powers exercised by special resolution 213. Unanimous assent to certain types of action 214. Company to satisfy solvency test 215. Management review by shareholders 216. Shareholder shall require company to purchase shares 217. Notice requiring purchase 13

14 218. Price for shares to be purchased by company determined 219. Prices for shares referred to arbitration if shareholder objects price 220. Interest payable on outstanding payments 221. Timing of transfer of shares 222. Purchase of shares by third party 223. Court may grant exemption 224. Court may grant exemption if company insolvent 225. Classes and interest groups 226. Alteration of shareholder rights 227. Shareholder may require company to purchase shares 228. Actions not invalid 229. Annual general meeting and extraordinary general meetings 230. Business to be transacted at annual general meeting 231. Non approval of financial statements at annual general meeting 232. Special meetings of shareholders PART XII MEETINGS AND RESOLUTIONS 233. Resolution in lieu of meeting 234. Annual General Meeting 235. Extra Ordinary General Meetings 236. Class Meetings 237. Requisition of a general meeting 14

15 238. Entitlement to receive notice of meetings 239. Length of notice for convening a meeting 240. Power of court to order meeting 241. Place of meetings 242. Attendance at meetings 243. Conduct of meetings and voting 244. Chairman s declaration as to result of a vote 245. Right to demand a poll 246. Voting on a poll 247. Proxies 248. Representation of bodies corporate and unincorporated associations at meetings 249. Circulation of members resolutions and supporting circulars 250. Circulation of members circulars 251. General provisions in regard to members circulars 252. Ordinary, extraordinary and special resolutions 253. Written resolution for private companies 254. Registration of copies of certain resolutions 255. Date of certain resolutions 256. Minutes of proceedings of meetings of company and of creditors 257. Inspection of minute books 258. Shareholders entitled to receive distributions, attend meetings, and exercise rights PART XIII DEBENTURES AND CHARGES 15

16 259. Issue of debentures 260. Documents of title to debentures 261. Assignees for debenture holders 262. Eligibility for appointment as assignee for debenture holders 263. Right to copies of trust deed 264. Unsecured debentures to be so described 265. Register of debenture holders 266. Meetings of holders of debentures secured by a trust deed 267. Meeting of other debenture holders 268. Re-issue of redeemed debentures 269. Charge to secure fluctuating amount 270. Company s register of chargers 271. Registrar s register of charges 272. Registration of charges by companies 273. Certificate to be issued by Registrar 274. Priorities 275. Entries of satisfaction and release of property from charge 276. Variation of registered charge 277. Registration of enforcement of security by mortgagee 278. Endorsement of registration on debentures PART XIV ENFORCEMENT 279. Meaning of an entitled person, former shareholder etc 280. Restraining Order 16

17 281. Filing a claim on behalf of company 282. Filing claim by shareholders 283. Shareholder s rights 284. Approving decisions made PART XV ACCOUNTING RECORDS AND AUDIT 285. Accounting records 286. Place accounting records to be kept 287. Appointment of auditors 288. Auditor s resignation 289. Auditor s fees and expenses 290. Auditing firm 291. Signing of auditor s report 292. Qualifications of auditors 293. Automatic reappointment of auditor 294. Auditor not wanting to be reappointed 295. Payment to auditor who resigns or completes duties 296. Replacement of auditor 297. Auditor to avoid conflict of interest 298. Auditor s report 299. Access to information 300. Auditor s attendance at meeting of shareholders 301. Furnishing auditor s report 302. Small private companies 303. Appointment of auditor for small private company 17

18 304. Financial statement preparation 305. Standards for financial statement preparation 306. Obligation to provide consolidated financial statement 307. Profit and loss statement when company becomes a subsidiary 308. Date for financial statement of subsidiary company 309. Annual return to be made to the Registrar 310. Annual return to be made by a public company 311. Documents to be annexed to annual return of a public company 312. Offence relating to annual return 313. Notice of adopted date to be given to Registrar 314. Date of financial statement of subsidiary company 315. Date of group financial statements 316. Financial statements of company and financial statements of group of companies 317. Content of financial statements 318. Content of consolidated financial statement 319. Obligation to prepare annual report 320. Sending copy of annual report to company s shareholders 321. Content of annual report 322. Inspection of company s documents by shareholders 323. Records to be made available for inspection 324. Manner of inspection 325. Commencement of Inspection 326. Amalgamation PART XVI AMALGAMATION 18

19 327. Amalgamation proposal 328. Amalgamation resolution 329. Documents forwarded to shareholders of amalgamating company 330. Procedures before amalgamation 331. Approving amalgamation proposal 332. Filing notice of amalgamation 333. Registration of amalgamation proposal 334. Certificate of amalgamation 335. Effect of certificate of amalgamation 336. Removing amalgamating companies from register 337. Property, rights, powers and privileges of amalgamated companies 338. Liabilities and obligations of amalgamated companies 339. Enforcement of court ruling by new company 340. Opposing amalgamation 341. Respecting provisions of amalgamation proposal PART XVII FOREIGN COMPANY 342. Definition of foreign company 343. Registration of foreign company 344. Foreign company that shall not be registered 345. Filing notice of change of companies authorised agent 346. Deadline for replacement of authorised agent 19

20 347. Change in Particulars 348. Filing of court order with Registrar 349. Balance Sheet 350. Obligation of foreign company to comply with requirements applicable to local companies 351. Obligation to comply with International Accounting Standards 352. Foreign company to file notice of particulars of its business in Zambia with balance sheet 353. Branch registers 354. Notice of place where register is kept 355. Notice of any change in register 356. Certificate primacie evidence of registration 357. Financial requirements before certificate is issued 358. Cessation of business in Zambia 359. De-registration of foreign company 360. Registration of foreign company and continuation of business 361. Prohibition to conduct business in certain sectors 362. Funds invested by foreign company 363. Prohibition against borrowing initial investment PART XVIII DORMANT COMPANIES 364. Definition of dormant company 365. A company which may be registered as dormant company 366. Banking or insurance companies prohibited from self declaration as dormant 20

21 367. Notice by dormant company 368. Notice by company which ceases to be dormant 369. Exemption for dormant company PART XIX ADMINISTRATION OF THE ACT 370. Administration of Act 371. Establishment of companies office 372. Powers of registrar 373. Appointment of officers 374. Seal of the Agency 375. Register of companies 376. Inspection of register 377. Registrar to furnish information from register on request 378. Immunity of officers regarding official acts 379. Registration of documents 380. Extension of time 381. Documents to be approved in English 382. Prescribed forms 383. Evidentiary provisions 384. Inspection of records 385. Waiver of fees 386. Appeal against decision of registrar 387. Collection of information and statistics from companies 388. Oaths and affirmations 389. Evidence of entries and documents 390. Power of registrar to award costs 21

22 391. Proceedings before the registrar 392. Loss or destruction of certificate 393. Reference to High Court by Registrar 394. Registrar to appear in legal proceedings 395. Costs of the registrar 396. Regulations PART XX MISCELLANEOUS PROVISIONS 397. Electronic transactions PART XXI OFFENCES AND PENALTIES 398. Failure to comply with this Act 399. Failure to keep books 400. Failure to provide documents 401. False or misleading notice Cap Knowingly furnishing false document Cap Fraudulent use or destruction of property Cap Falsification of records Cap Using fraudulent document Cap Carrying on business fraudulently 407. Penalties for carrying on business fraudulently 408. Persons prohibited from managing companiescap Other offences Cap 87 22

23 410. Liability of Directors and management 411. General penalty 412. Non compliant company excluded from incentives Act No. of , Act No. 11 of 2006, Cap Penalty for false statements 414. Penalty for improper use of incorporated or Limited 415. Civil liability for fraudulent trading 416. Offence of fraudulent trading 417. Imprisonment for failure to pay fine 418. Costs in action of limited companies 419. Contribution between joint wrongdoers 420. Power to grant relief from civil liability 421. Exemption from liability for actions or omissions 422. Falsification of entries in register 423. Altering of documents 424. Deceiving or influencing the registrar or an officer 425. Witness giving false evidence 426. Aiding and abetting 427. False representation about Companies Office 428. Penalties 429. Rules of Court PART XXII TRANSITIONAL PROVISIONS 430. Registration of charges 23

24 431. Companies subject to other legislation Effect of this Act on those persons holding office at commencement of Act 432. Act made under Cap 388 to continue 433. Effect of the existing companies articles of association and resolutions of shareholders at the commencement of Act 434. Effect of the repeal of Cap 388 on judicial proceedings, etc 435. Register, fund and account under Cap Company registration 437. Fee, charge or sum paid or unpaid 438. Approval of acts and resolutions 439. Continuing the winding up process cap Repeal of Cap Repeal of inconsistent provisions Cap

25 A BILL ENTITLED An Act to provide for the incorporation, categorization, management and administration of different types of companies; to provide for modern day practices in company law such as mergers, acquisitions, amalgamations and restructuring; to provide for the registration of foreign companies doing business in Zambia; to provide for cooperatives to operate under the style of companies and be registered; to provide for the colour coding of certificates of incorporation of Zambian companies and of the registration certificates of foreign companies; to incorporate corporate governance and financial reporting provisions and provide for the functions and obligations of a company secretary and a director; to provide for the responsibilities of public companies; to provide for the start up and functioning of small companies; to repeal and replace the Companies Act, 1994; and to provide for matters connected with or incidental to the foregoing. 25

26 Enactment ENACTED by the Parliament of Zambia PART I PRELIMINARY Short title and commencement 1. (1) This Act may be cited as the Companies Act, (2) This Act shall come into operation when the Insolvency Act, 2013 comes into operation. Application and administration of Act 2. (1) Notwithstanding subsection (2), this Act shall not apply to a corporate body established or registered under the provisions of any other law, in respect of any business carried on by it under the name by which it is so established or registered. (2) Notwithstanding any other law, this Act shall apply to co-operatives, co-operative unions and trusts for purposes of registration and incorporation. (3) This Act shall be administered by the Agency. Interpretation requires - 3. In this Act, unless the context otherwise Agency means the Patents and Companies Act No. 15 of 2010 Registration Agency established under the Patents and Companies Registration Act; 26

27 accounts means the financial statements of a company together with accompanying notes, but does not include the auditors report or annual report of the company; accountant means a person qualified in the theory and practice of accountancy, an auditor, tax consultant and tax adviser registered under the Act No. 13 of 2008 Accountants Act; accounting records include (a) invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes, vouchers and other documents of prime entry; and (b) such working papers and other documents as are necessary to explain the methods and calculations by which the accounts are made up; accounting period means the period in respect of which the financial statements of a company or other body corporate are made up, whether that period is a year or not; address means a place where an individual or company is located and in the case of the address of - (a) an individual person, means the full 27

28 address of the place where that person usually lives; and (b) a company, means its registered office or its principal place of business; agency deed means a deed executed by a company or a debenture holder's representative in relation to the issue of debentures and a supplementary document, resolution or scheme of arrangement modifying the terms of the deed and a deed substituted for it; annual accounts the annual financial statements of a company that gives a true and fair view of the financial performance, financial position and cash flows of the company; and includes consolidated financial statements for a group that gives a true and fair view of the group s financial performance, financial position and cash flows; annual general meeting means an annual general meeting of the shareholders of a company, required under this Act; annual report means an annual report of the affairs of a company required to be prepared under this Act; "annual return" means the return referred to in section three-hundred and nine, together with 28

29 any document required by this Act to accompany the return; approved valuer means a technical or professional who is a lawfully registered expert under any other law and includes - (a) a qualified auditor; (b) an urban engineer; (c) a qualified architect; (d) a qualified inspector; (e) a land surveyor; and (f) any other person registered or designated as such under any law; arrangement means the re-organization of the share capital of a company by the consolidation of shares of different classes, by the division of shares into shares of different classes or by other methods intended to change the shares; articles means the articles of association of a company provided for under section six; auditor means a person holding a practicing certificate or a firm registered under the Act No. 13 of 2008 Accountants Act and appointed to perform any auditing functions; auditor s report means the report of the auditors of a company referred to in section two hundred 29

30 and ninety one. board of directors means (a) persons appointed or nominated as directors of a company who number not less than the required quorum acting together as a board; or (b) if the company has at the time only one director, that director; "body corporate" means a company or corporation incorporated under or by virtue of the laws of Zambia or of any other country, other than a corporation sole; "book" includes accounts, deed, writing, register, document, accounting record, and any clear record of information, however compiled and whether recorded or stored in written or printed form or by electronic or photographic process or otherwise; "branch register" means a branch register of a company established under this Act; certified true copy means - (a) a copy or extract of a document, certified in such a manner as may be approved by the Registrar to be a true and complete copy of the original, or extract of the document; (b) in relation to a translation of a 30

31 document in a language other than English, a document certified in such a manner as may be approved by the Registrar to be a correct and accurate translation of the original document into English; citizen means a citizen of Zambia; Act No. 9 of 2006 Act No. 9 of 2006 citizen empowerment company has the meaning assigned to it under section 5 of this Act ; citizen owned company has the meaning assigned to it under section 5 of this Act ; class means a class of shares having attached to the shares the same rights, privileges, limitations and conditions; company means a business enterprise incorporated under this Act; company s book includes any account, deed, writing or document and any other record of information however compiled, recorded in or stored belonging to a company; company limited by guarantee means a company formed on the principle of having the liability of its members limited by its constitution to such amount as the members may respectively undertake to contribute to the assets of the company in the event of it being wound up; company limited by shares means a company in 31

32 which the liability of a shareholder is limited to the amount unpaid on subscribed shares; compromise has the meaning assigned to the term under the Insolvency Act, 2013; co-operative has the meaning assigned to the term under the Co-operative Societies Act; corporation means a body corporate, including a foreign company or any other body corporate in or outside Zambia that is registered under this Act to do business in Zambia; court means the High Court for Zambia; ; creditor means a person who, in a liquidation, is entitled to claim that a debt is owing to that person by a company; debenture has the same meaning assigned to it under the Insolvency Act, 2013; director means a person appointed as a member of the board of directors under Part VII, or an alternate director, by whatever name designated; dividends means a number or quantity of money to be divided among shareholders; entitled person means a shareholder or any other person who is recognised under a company s articles as enjoying a shareholder s rights and obligations; extraordinary general meeting means a general 32

33 Cap.387 meeting of a company that is not an annual general meeting; extraordinary resolution means a resolution passed by a majority of at least seventy-five percent of the votes cast by such shareholders, as being entitled so to do, vote in person or by proxy at a meeting duly convened and held; financial institution has the meaning assigned to financial service providers under the Banking and Financial Services Act; foreigner owned company means assigned to it under section 5 of this Act; group of companies means a group comprising a holding company and its subsidiaries; holding company means a company that (a) controls the composition of the board of another company; (b) is in a position to exercise, or control the exercise of, more than one-half the maximum number of votes that can be exercised at a meeting of another company; (c) holds more than one-half of the issued shares of another company, other than shares that carry no right to participate beyond a specified amount in a 33

34 distribution of either profits or capital; or (d) is entitled to receive more than one-half of every dividend paid on shares issued by another company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital; indictable offence means an offence which, if committed by an adult, is triable on indictment; initial investment means the amount required to start a business venture and excludes working capital; insolvency test has the meaning assigned to it under the Insolvency Act, 2013; insurance broker has the same meaning assigned to Act No. 27 of 1997 Act No. 27 of 1997 that term under the insurance Act; insurance business has the meaning assigned to the term under the Insurance Act; interest register means the register into which the interest, of a director or shareholder, regarding any business of a company is recorded; international financial reporting standards means principle based standards, adopted by the International Accounting Standards Board, that provide a global framework on how companies should prepare and disclose their 34

35 Act No of financial statements; international standards on auditing means auditing standards, issued by the International Auditing Standards Board, that members are expected to follow in the conduct of audits of financial statements; limited company means a company limited by guarantee or a company limited by shares; "liquidator" has the meaning assigned to it in the Insolvency Act, 2013; meeting means an annual general meeting, extraordinary general meeting or special meeting; member means a shareholder or stockholder of a company or a subscriber to a company limited by guarantee; nominee means a person entitled to exercise a right only in accordance with instructions given by another person; non-executive director means a director who is not involved in the day to day management of a company; officer includes- (a) a director, company secretary or executive officer of a company; (b) a local director of a foreign company; 35

36 ordinary resolution means a resolution passed by a simple majority of votes cast by such shareholders as, being entitled so to do, vote in person or by proxy at a meeting duly convened and held; person concerned means - (a) a person who is or has been employed by a company as a director, banker, accountant, advocate or legal practitioner, Registrar or otherwise; (b) a person who, or in relation to whom, there are reasonable grounds for suspecting that the person - (i) has in the person s possession any property of a company; (ii) is indebted to a company; (iii) is able to give information concerning the promotion, formation, management, dealings, affairs or property of a company; pre-emptive rights means shares issued or proposed to be issued by a company that rank or would rank as to voting or distribution rights, or both, equally with or prior to shares already issued by the 36

37 company which may be offered, for a reasonable period, for acquisition to the holders of the shares already issued in a manner and on terms that would, if accepted, maintain the existing voting or distribution rights, or both, of those holders; prescribed" means prescribed in the regulations made under this Act; "private company" means a private company limited by shares, a company limited by guarantee or an unlimited company; "private company limited by shares" means a company incorporated as such, being a company satisfying any provision under this Act; property means property of every kind whether tangible or intangible, real or personal, corporeal or incorporeal and includes all rights, in relation to property whatever their nature; prospectus means a notice, circular, advertisement or request inviting applications or offers from the public to subscribe for or purchase, a share in, or debenture of, a company or proposed company; receiver has the same meaning assigned to it in the Act No. of 2012 Act No. 13 of 2008 Insolvency Act, 2013; "registered accountant" means an accountant 37

38 registered under the Accountants Act; register means the register of companies kept at the Agency under this Act; registered means lodged with the Registrar and entered in the register; Registrar means the person appointed as Registrar Act No. 15 of 2010 under the Patents and Companies Registration Agency Act; related entity of a director means a company or corporation in which the director and any relative or relatives of the director between them hold, themselves or through nominees, voting interests that exceed fifty percent; repealed Act means the Companies Act Chapter 388 of the Laws of Zambia; "seal" means the common seal of a company or other body corporate; secured creditor has the meaning assigned to the term under the Insolvency, 2013; Act No. of 2012 security includes - (a) a mortgage; (b) a given property or part of it; (c) a deposit of a share or debenture certificate; (d) a lien consisting of shares or 38

39 debentures; (e) a lien over a motor vehicle; (f) a lien over industrial materials; (g) an agreement to give a charge; but does not include the following: (a) a hire-purchase agreement and rentals; (b) rent charges; and (c) annuities granted or reserved out of land; shareholder means a person whose name - (a) is entered in the share register as the holder for the time being of one or more shares in a company; or (b) appears in a request for company registration at the time of a company s incorporation and who is regarded as a shareholder until the person s name is entered in the share register; or (c) is to be entered in the share register under an amalgamation proposal and is regarded as a shareholder in an amalgamated company until the person s name is entered in the share certificate; shares includes stock; 39

40 share register means the register referred to under section one hundred and seventy two. small private company means any company whose total investment, excluding land and buildings, annual turnover and the number of persons employed by the enterprise, does not exceed the numerical value prescribed; Act No. 20 of 1998 Cap.387 Act No. of statutory regulatory Act means the Co-operative Societies Act, the Land (Perpetual Succession) Act, the Banking and Financial Services Act or the Insurance Act, as the case may be; special meeting means a meeting called in accordance with section two hundred and thirty to considered any matter provided under this Act; special resolution means a resolution approved by at least seventy - five per cent of the votes of the shareholders, as being entitled so to do, vote in person or by proxy at a meeting duly convened as a meeting at which the resolution will be moved as a special resolution and duly held, or such higher majority percentage as the articles of association may require; subsidiary means a company that is a subsidiary to a holding company; Cap. 186 trust means an arrangement in which a person 40

41 transfers property to one or more assignees who will hold such property for the benefit of one or more persons and which is regulated under the Lands (Perpetual Succession) Act; unlimited company means a company formed on the principle of having no limit placed on the liability of its shareholders. PART II REGISTRATION AND INCORPORATION Incorporation of company 4. (1) Subject to this Act, two or more persons associated for any purpose may incorporate a company by subscribing their names to an application for incorporation in the prescribed manner and form upon payment of the prescribed fee. (2) Subject to subsection (3), an individual shall not subscribe to an application for incorporation if the person (a) is under eighteen years of age; (b) is an undischarged bankrupt under the laws of Zambia; (c) subject to an order by the court, is an undischarged bankrupt under the laws of another country; (d) is of unsound mind and has been declared 41

42 to be so by the court or a court of competent jurisdiction of another country; or (e) has, in the last five years prior to the application, been convicted of an offence involving fraud or dishonesty in Zambia or elsewhere. (3) The incorporation of a company shall not be invalid by reason only that an individual or individuals subscribed to the application for incorporation in contravention of subsection Essential requirements 5. (1) Every company shall - (a) have a name; (b) have an address; (c) (d) have a main business objective; be limited by shares or guarantee or have unlimited liability for the obligations of the company; Content of memorandum of association (e) (g) have two or more directors; and, Every company shall have a nominal Capital or guaranteed amount which shall not be less than the prescribed minimum. (2) The minister shall prescribe the minimum issued share capital or guaranteed amount. Articles of association and amendments 42

43 6. (1) A company shall have articles regulating the conduct of the company. (2) The articles of association may contain restrictions on the business that the company may carry on. 3) A company shall not carry on any business or exercise any power that it is restricted by its articles from carrying on or exercising, nor exercise any of its powers in a manner contrary to its articles. (4) Where a provision in the articles is inconsistent with this Act or any other written law, the provision is invalid to the extent of the inconsistency. (5) A company may adopt the provisions of standard articles set out in the Schedule. (6) The articles of association of a public company or a private company limited by shares shall be deemed to have adopted the provisions of the standard articles set out in the Schedule, except insofar as the articles exclude or modify those provisions. (7) The articles of association shall be divided into paragraphs numbered consecutively. (8) Subject to this Act, and to its articles, a company may amend its articles of association if it passes a special resolution approving the 43

44 amendment. (9) If a company passes a special resolution approving the amendment of its articles of association, it shall within twenty-one days after the date of the resolution lodge a copy of the resolution with the Registrar together with a copy of each paragraph of the articles affected by the amendment, in its amended form. (10) The articles of association have effect in their amended form on and from the day of their lodgment with the Registrar or such later date as may be specified in the resolution. (11) If a company fails to comply with subsection (9), the company, and each officer in default, commits an offence, and shall be liable on conviction to a fine not exceeding forty thousand penalty units for each day that the failure continues. Signing and adoption of articles of association 7. The articles of association of a company shall be signed by persons who shall constitute the first members of the company. Effect of articles of association 8. (1) The articles of association of a company shall have the effect of a contract - (a) between the company and each member or shareholder; and (b) between or amongst the members 44

45 or shareholders. (2) The articles of association shall bind the company and its members. (3) The articles of association shall take effect on the day on which they are lodged with the Registrar. (4) If a company does not lodge articles of association with the Registrar, the company shall be deemed to have adopted the standard articles. Adoption of new articles of association Registration and certificate of incorporation 9. The shareholders of a company may, by special resolution, adopt new articles of association of a company where they consider it necessary to do so. 10. (1)As soon as the Registrar receives an application for registration of a company, the Registrar shall (a) (b) register the proposed company; issue a certificate of incorporation in the prescribed form; (c) assign a unique number to the company, as its registration number; and (d) colour code the certificate of incorporation in accordance with Part II 45

46 (2) A certificate for the incorporation of a company may be in electronic form. Certificate to be evidence of incorporation 11. A certificate of incorporation of a company is conclusive evidence that - (a) all the requirements of this Act regarding registration have been complied with; and (b) on and from the date of incorporation stated in the certificate, the company is incorporated under this Act. Legal status of registered company 12. A company registered under this Act shall be a company with a separate legal status, with the name by which it is registered and shall continue to exist until it is removed from the register. Register and other records 13. (1) The Registrar shall keep a register of companies at the Agency, which may be in manual or electronic form. (2) The register shall contain - (a) particulars of all incorporated companies; (b) the company s articles of association; (c) the names of the shareholders; and 46

47 (d) the names of the directors. (3) The Registrar shall keep a record of such other details as may be prescribed, including charges on a company s assets and any offences committed by a company, its shareholders or directors. PART III TYPES OF COMPANIES AND REQUIREMENTS Types of companies 14. There shall be the following types of companies: (a) a company limited by shares; (b) a company limited by guarantee; (c) an unlimited company. Categories of companies 15. (1) Every company shall be incorporated under one of the following categories: (a) a public company; (b) a private company, being- (i) a company limited by shares; (ii) a company limited by guarantee; or (iii) an unlimited company; (c) a statutory regulated company, being a- (i) a cooperative; (ii) a trust; 47

48 (iii) a bank; (iv) (v) (vi) a financial institution; a insurance business; a insurance broker; or (vii) such other company as may be prescribed under an under an Act of Parliament. (2) A company incorporated under this Act may be sub categorized as a- (a) citizen empowerment company where twentyfive to fifty percent of company equity is owned by citizens. (b) citizen owned company where at least fifty percent of company equity is owned by citizens (c) citizen participatory company where five to twenty-five of company equity is owned by citizens. (d) foreign-owned company where over fifty percent of company equity is owned by foreigners. (3) Notwithstanding section four, an unlimited company shall not be a public company. Prohibition on micro and small foreign companies and foreign owned companies (4). A foreign company or foreigner owned company shall be disqualified from incorporation if, when registered, will fall under the category of micro or small enterprise. Public companies 48

49 capital. 16. (1) A public company shall have share (2) The articles of a public company shall state - (a) the rights, privileges, restrictions and conditions attaching to each class of shares, if there are two or more classes; and (b) the authority given to the directors to determine the number of shares in, the designation of, and the rights, privileges, restrictions and conditions attaching to, each series in a class of shares, if the class of shares may be issued in series. (3) All shares shall rank equally apart from differences due to their being in different classes or series. (4) Where a public company is wound-up, a member shall be liable to contribute, in accordance with Insolvency Act 2012, an amount not exceeding Act No. of 2012 the amount, if any, unpaid on the shares held by him. (5) The articles of association of a public company shall not impose any restriction on the right to transfer any shares of the company other than - (a) a restriction on the right to transfer any shares on which there is unpaid 49

50 liability; (b) a restriction on the right to transfer shares issued to directors or other officers or employees exercising any rights or options granted under section seventy-three, or issued in pursuance of any scheme adopted under that section; or (c) a provision for the compulsory acquisition, or rights of first refusal, of shares referred to in paragraph (b), in favour of other members of the company or assignees appointed. under any scheme adopted under Private companies limited by shares 17. (1) The articles of association of a private company limited by shares shall state- (a) the rights, privileges, restrictions and conditions attaching to each class of shares, if there are two of more classes; and (b) the authority given to the directors to determine the number of shares in, the designation of, and the rights, privileges, restrictions and conditions attaching to, each series, if a class of shares may be issued in 50

51 Act 2012 No. series. (2) All shares shall rank equally apart from differences due to their being in different classes or series. (3) Where a private company limited by shares is wound-up, a member shall be liable to contribute, in accordance with the Insolvency Act, an amount not exceeding the amount, if any, unpaid on the shares held by that member. Companies limited by guarantee 18. (1) Each subscriber to an application for incorporation as a company limited by guarantee shall sign a declaration of guarantee specifying the amount that the subscriber undertakes to contribute to the assets of the company in the event of its being wound-up. (2) Each subscriber to the application for incorporation shall, on the incorporation of the company, be a member of the company. (3) Subject to any additional requirements imposed by the articles of the company- (a) a person shall become a member of the company, on approval by a special resolution of the company, by signing a declaration of guarantee and delivering it to the company; and (b) a person shall cease to be a member on 51

52 Act No of delivering to the company a signed notice in writing to that effect. (4) Within seven days after a person becomes a member or ceases to be a member of the company, the company shall lodge with the Registrar a notice in the prescribed form, together with, in the case of a person's becoming a member, the declaration of guarantee by the person. (5) A company limited by guarantee shall not carry on business for the purpose of making profits for its members or for anyone concerned in its promotion or management. (6) Where a company limited by guarantee is wound-up, a member shall be liable to contribute, in accordance with the Insolvency Act, an amount not exceeding the amount specified in the declaration of guarantee made by the member. (7) If the company carries on business for the purpose of making profits for its members or for anyone concerned in its promotion or management- (a) those officers and members of the company who willfully authorise or permit the business to be carried on for that purpose shall be jointly and severally liable for the payment and discharge of all debts and liabilities of the company incurred in carrying 52

53 on the business so authorised or permitted; and (b) each of the officers and members referred to in paragraph (a) commits an office, and shall be liable on conviction to a fine of not more than one hundred thousand penalty units for each day on which that business is carried on. (8) If the company fails to comply with subsection (4), the company, and each officer in default, commits an offence, and shall be liable, on conviction, to a fine not exceeding thirty thousand penalty units for each day that the failure continues. Unlimited companies 19. (1) An unlimited company shall have share capital and its articles of association shall state - (a) the rights, privileges, restrictions and conditions attaching to each class of shares, if there are two or more classes; and (b) the authority given to the directors to determine the number of shares in, the designation of, and the rights, privileges, restrictions and conditions attaching to each series, if a class of 53

54 shares may be issued in series. (2) All shares shall rank equally apart from differences due to their being in different classes or series. (3) Where an unlimited company is wound-up, a member shall be liable to contribute, in accordance Act No. of 2012 Statutory regulated company with the Insolvency Act, without limitation of liability. 20. (1) A statutory regulated company shall be registered and incorporated in accordance with this Act and regulated under the relevant law. (2) The requirements applicable to companies shall apply mutatis mutandis to statutory regulated companies. Conversion of company limited by shares to company limited by guarantee 21. (1) A company limited by shares may be converted to a company limited by guarantee by a special resolution where (a) there is no unpaid share; (b) all its members agree in writing to the conversion and to the voluntary surrender of the company for cancellation of all the shares held by them immediately before the conversion; and (c) new articles of association appropriate to a company limited by 54